Identity Theft and Bankruptcy

In the digital age where credit card purchases are common place both online and at smaller stores, identity theft has become a household word. According to creditcards.com, “the number of U.S. identity fraud victims rose 12 percent to 11.1 million adult [in 2009], the highest level since the survey began in 2003.” The better news, according to the same database, is that though the number of victims jumped 22 percent from 2007 to 2008, the total amount of the annual fraud rose only 7 percent. This means that while more people are affected, both detection and resolution are coming sooner.

According to the U.S. Justice Department, identity fraud in bankruptcy cases is anything but uncommon. According to a Justice Department report, “the U.S. Trustee Program’s primary role… is to outline the various ways in which identity theft intersects with bankruptcy,” and to work with law enforcement agencies to preserve the integrity of the bankruptcy system. According to the report, forms of bankruptcy-related identity theft include:

Filing for bankruptcy using the name or social security number of another known person

Incurring debt under a false name and then filing for bankruptcy, most commonly this debt is owed to the government in the form of a farm, small business or student loan

Transferring property into the name of a relative or friend and then filing for bankruptcy using that person’s name to avoid foreclosure

Filing for bankruptcy using a false name or social security number that was randomly chosen

Transferring a fractional interest in real property into the name of an innocent person whose bankruptcy case is pending

Using a false social security number when filing for bankruptcy

Identity theft is a crime, and punishment varies from state to state. In Illinois, depending on severity and type of identity theft, the crime is classified from anywhere from a Class A misdemeanor to a Class 2 Felony.